SocGen's Wei Yao
Investors watch the loans number since they show the state of
demand for credit. Yao writes that the Chinese central bank and
the banking regulator are concerned about credit risk in the
banking system, "and there is certainly justification for this as
non-performing loan levels are rising".

On the upside though, the rise in corporate bond financing
however has been accelerating which shows policymakers are
keeping their promise of deepening financial markets and
increasing different sources of financing for corporates.

But Lu wrote that this could in fact be good for markets since,
China should now cut its reserve requirement ratio and could cut
its interest rate. He also said this could prompt Beijing to ease
lending restrictions on local government funding vehicles (LGFVs)
and could ease the 75 percent loan-to-deposit ratio level in
smaller banks.

Finally and most importantly, Lu writes that the government
should clarify that it won't introduce stricter measures on home
purchases and instead, "should consider encouraging increasing
home supply in order to bolster growth and stabilize home
prices".

Xinhua
China's state news agency Xinhua however said that this slowdown
doesn't necessarily mean a tightening of money supply and instead
could be a seasonal decrease after a sharp increase in June.